China Prepares To Bailout Russia

Tyler Durden's picture

Earlier this evening China's State Administration of Foreign Exchange's (SAFE) Wang Yungui noted "the impact of the Russian Ruble depreciation was unclear yet, and, as Bloomberg reported, "SAFE is closely watching Ruble's depreciation and encouraging companies to hedge Ruble risks." His comments also echoed the ongoing FX reform agenda aimed at increasing Yuan flexibility which The South China Morning Post then hinted in a story entitled "Russia may seek China help to deal with crisis," which which noted that Russia could fall back on its 150 billion yuan ($24 billion) currency swap agreement with China if the ruble continues to plunge, that was signed in October. Furthermore, two bankers close to the PBOC reportedly said the swap-line was meant to reduce the role of the US dollar if China and Russia need to help each other overcome a liquidity squeeze.


As Bloomberg reported, earlier in the evening, China's Wang Yungui noted


Adding that China plans sweeping reforms to promote FX flexibility.

And then The South China Morning Post hints,

Russia could fall back on its 150 billion yuan (HK$189.8 billion) currency swap agreement with China if the rouble continues to plunge.


If the swap deal is activated for this purpose, it would mark the first time China is called upon to use its currency to bail out another currency in crisis. The deal was signed by the two central banks in October, when Premier Li Keqiang visited Russia.


"Russia badly needs liquidity support and the swap line could be an ideal tool," said Bank of Communications chief economist Lian Ping.


The swap allows the central banks to directly buy yuan and rouble in the two currencies, rather than via the US dollar.


Two bankers close to the People's Bank of China said it was meant to reduce the role of the US dollar if China and Russia need to help each other overcome a liquidity squeeze.


China has currency swap deals with more than 20 monetary authorities around the world. Swaps are generally used to settle trade.


"The yuan-rouble swap deal was not just a financial matter," said Wang Feng, chairman of Shanghai-based private equity group Yinshu Capital. "It has political implications as it is a sign of mutual trust."


The rouble has lost more than 50 per cent against the US dollar this year, pushing Russia to the brink of a currency crisis, though measures announced by the central bank helped it recover some ground yesterday.


Li Lifan, a researcher at the Shanghai Academy of Social Sciences, said the swap would not be enough for Russia even if it is used in its entirety. "The PBOC might agree to extend something like 15 billion yuan initially as a way of showing China's commitment to Russia."

*  *  *

As we discussed in October when the swap deal was signed, if to assure all involved parties that there will be enough capital support on both sides, the PBOC released a surprising announcement that the central banks of China and Russia signed a 3-year, 150 billion yuan bilateral local-currency swap deal today, according to a statement posted on PBOC website. Deal can be expanded if both parties agree, statement says. Deal aims to make bilateral trade and direct investment more    convenient and promote economic development in 2 nations.


To be sure, some such as Bloomberg, are skeptical that the unprecedented pivot by Russia toward China as it shuns the west, will merely harm the Kremlin. Others, however, wonder: who will be left standing: Europe, with its chronic deficit of energy and reliance on Russia; or Russia, a country overflowing with natural resources, whose economy is currently underoing a dramatic and painful shift, as it scrambles to dissolve all linkages to the Petrodollar and face the Gas-O-Yuan?

*  *  *

Is 'isolated' Russia about to be bailed out by the world's largest economy China?


Perhaps, they already started...


But then again - with the BRICS currencies all turmoiling... (ZAR -22% not shown)


Perhaps it is not such a surprise as members take advantage of The BRICS Bank's $100 Billion reserve...

The punchline, however, is that using bilateral swaps, the BRICS are effectively disintermediating themselves from a Fed and other "developed world" central-bank dominated world and will provide their own funding.

We are pleased to announce the signing of the Treaty for the establishment of the BRICS Contingent Reserve Arrangement (CRA) with an initial size of US$ 100 billion. This arrangement will have a positive precautionary effect, help countries forestall short-term liquidity pressures, promote further BRICS cooperation, strengthen the global financial safety net and complement existing international arrangements.... The Agreement is a framework for the provision of liquidity through currency swaps in response to actual or potential short-term balance of payments pressures. 

Incidentally, the role of the dollar in such a world is, well, nil.

For those who have forgotten who the BRICS are, aside from a droll acronym by a former Goldman banker, here is a reminder of the countries that make up 3 billion in population.


Chart: Bloomberg

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TeamDepends's picture

Yeah! Did you see the thing that washed ashore in Cali? Looks an awful lot like the Montauk Monster!?!?! (shit getting realer)

OldPhart's picture

Looked like a long floating, mangy, opossum to me.

CrazyCooter's picture

Yeah, but you are looking at traditional ICBM nuking.

What if Putin slides a coupld of tact nukes to the resistance which proceed to melt vast arrays of enemy equipment. Everyone gets to blame "terra-ists".

Think that won't slow down/stop this Ukie shit? Without US backing, they are nothing. So, if the US goes balls deep on Ukraine, with shit tons of classic military hardware, what do you think is going to happen?

Get out a map, Moscow is not that far from Ukraine as the crow flies ...



silvermail's picture

Even one nuclear missile can make so that for one ruble everything in the world, everybody will be give $ 50.

messystateofaffairs's picture

Plus when they die they're going to hell so they have to stretch it out here as long as possible. Look at Cheyney and Soros for example, practically walking corpses.

August's picture

And, soon, David Rockefeller will be starting his second century.

cornflakesdisease's picture

Yes, who would clean their pools and iron their shirts.  Even at the peak of the cold war, the Russian delegates still visited Bohemian grove, drank cocktails, talked geo-politics, and chased young milk boys.

Nexus789's picture

With psychopathic/sociopathic individuals I would not be so sure. The fact that you think it will never occur (due to MAD) means that you are normal and have normal human responses. The individuals that populate the top of politics, government and business, do not act ‘normally’. Have a read of ‘Political Ponerology’.

jughead's picture

"Ive said it before and i'm gonna keep saying it again. NO ONE is going Nuclear. Period. End of Story."

Murphy is laughing at you.

DonGenaro's picture

remember what the scorpion said to the frog: "It's in my nature".


Publicus's picture

That is what the swap agreements are for.

Augustus's picture

Maybe you missed it.

The russian central bank has already done that with about $150 billion USD.

Latest attempt may be what is causing the strengthening from 80 to 60.

Angry Plant's picture

The only thing stopping them is the fact that the rubbles will come from Russians that will then quickly transfer any dollars given to london. China would simply be mitigating the capital flight from Russia by Russians and end up holding  Rubles that were worth less then they paid for them everyday that pasted.

Bankers only do stupid things like that for there own countries not foreigners.

silvermail's picture

the rubbles will come from Russians that will then quickly transfer any dollars given to london?!


What specific products generates London, except those that were made in China?

Welder's picture

I think I preffer the Zio-NWO over this monstrosity. I am European and I live in Asia. You don't want them ruling the world. I have a profound dislike for the tribe and the bankster kabal ( like most ZH-ers) .....but apparently Western way of life stands or fall with them.


YHC-FTSE's picture

Sirry iriot. It's so rong, pet-lo-dorrar.

So many astute ZHers saw this coming from a mile away. I thought the chinese might wring it out for leverage over the russians, but here they are right on cue. Good for them. It was fucking insane imo to try to starve the russian populus with sanctions to implement the war in Syria and Ukraine. When Turkey (NATO) eventually turns its back to play with their new pipeline toy and Germany (NATO) becomes sane again - perhaps Snowden can help with some new revelations about the NSA/Merkel angle here -  the current NWO schemes will come undone for a little while and I can unclench my back passage from the threat of another bloody war. For a little while.

CrazyCooter's picture

I am still not 100% on board that they are all not in it together.

Global Kabuki Theatre if you will.

But, yes, I am quite nervous western leaders are so desperate for a diversion from the epic cluster-fail they are about to have explode in their faces that would start a war they can't control and might not even be able to win.

Next year is going to be a rough one I think, but I have been calling it wrong for a long time now. Hopefully it stays that way!



YHC-FTSE's picture

Hey Cooter! You'll have to forgive me, but as you may know, I haven't quite boarded that particular Global Kabuki Theatre bandwagon. Although it is not without merit, it's a bit of a stretch for me to imagine Obummer, Putin et al all sniggering together about their next lines on stage. Other than that, I think our worries are basically the same and we've all been anticipating the big systemic collapse for awhile now. At the end of the day, it's only money. But war is something I will always oppose for obvious reasons. It's always good to see you in the threads mate. :)

edotabin's picture

Why not? Didn't the Bush family have some construction deals with the bin Ladens? I don't remember the exact details maybe someone else can chime in.....

layman_please's picture

it doesn't always have to be a conspiracy. the politicians, regardless of the country and the ideology, have more common than they have with their citizens. that's enough to see who the real enemy of the establishment is.

in4mayshun's picture

Whenever it is, its coming soon. Too many pissed off citizens. Too many sheep waking up. Too little gold/silver.

The end cometh.

Augustus's picture

There is no such thing as a petrodollar.

Dollars can be used to buy peanuts, petroleum, planes, or pineapples, along with many other things.

DoChenRollingBearing's picture



Kim Jong Un visits his friend:

Birds of a feather...

(Kind of reminds me of the types Obama visits)

Richard Chesler's picture

Fuckoff Obongo.

Fuckyu Obongo.

red1chief's picture

Which is why a hot WW3 won't happen for the forseeable future.

crazytechnician's picture

The only thing that may come out on top of WW-III may be a few microbes somewhere at the bottom of the Pacific.

junction's picture

Where is George Soros, the expert at profiting from currency wars?  If Putin finds out that Soros is part of the New World Order gang hammering the ruble, Putin will move heaven and earth to end the dollar's status as the world's reserve currency.

Richard Chesler's picture


Herpes induced dementia.


Where is George Soros?

CrazyCooter's picture

Putin (as any leader) cares about his agenda/objectives. If anyone (e.g. Soros) gets in the way, they get the boot, otherwise they tend to try to keep powerful "friends" close.

None of these fuckers are church boys - they are more like the priests banging them.

Just bid'ness.



silvermail's picture

Putin (as any leader) cares about his agenda/objectives.


Your statement sounds very funny, if compared Putin with Angela Merkel or Olland.

McMolotov's picture

I'd like nothing more than for Putin to plant Soros six feet underground while he's still alive. Unfortunately, Soros has been one of the undead for a while now. He might like it.

Jump The Shark's picture

No, where is George Lucus. This will play out in the Arctic with Hoth Riders and At-Ats. It's about time. Rebels vs. Empire.

Augustus's picture

Soros is likely silent as he is still counting the zeroes to tally his profits from trading against the idiot Putin,

TeamDepends's picture

End of the petrodollar. But is this a surprise? It was born to die, now it buys 2% what it did in the beginning. Those suffering from normalcy bias are in for a rough ride.

CrazyCooter's picture

Not to split hairs, but the dollar since the 70s is not down 98% is it? That is the petro-dollar. The Fed dollar goes back to 1913 and it is waaaaay down.

But, correct in principle. :-)



TeamDepends's picture

The creature from Jekyll Island, how 'bout that?

813kml's picture

SAFE'S Wang saves the day.

Bloppy's picture

China is built on debt so it makes sense to issue moar debt to fund Russia's debt.



Flood of donations to North Korea refugee resettlement charity in response to Sony's cowardice:

Bloppy's picture

"Interview" promo items suddenly worth big bucks:

SilverIsMoney's picture

Ha! Just try fucking with China the way you've fucked with Russia Obozo...

Bahahahaha... this will probably be the basis of Putin's speech me thinks.

Yen Cross's picture

   And it's only Thursday/ Friday. I love it.

 You give us gas and we give you cheap manufacturing.

 Western media is completely brain washed.

Negative1's picture

Speaking of brain washed media, isn't Putin's annual bullshit speech to the masses happening on Thursday. Can't wait for those hard hitting softballs from their free press. Hahahahahahahahahahahahaha

sun tzu's picture

Any different from the lamestream western media?

FieldingMellish's picture

Time for the US to crush its largest creditor... oh wait...

Redneck Hippy's picture

The largest creditor would be the Fed.  Surely you wouldn't want any harm to come to Ms. Yellen?